Chrysler wasting your money

[Stephanos]

What can we have but inflation on this scale with the Federal Reserve monetizing at the present rate and the dollar rallying as foreign entities buy up U.S. assets in this deleveraging frenzy? Printing more money to bail out troubled industries is only amplifying this problem (but don't worry... it's a loan).

Why doesn't the Fed just give everyone a million dollars and be done with it?

Wouldn't that solve everything?!

[Stephanos]

If you have issue with the so-called "bailout" (I prefer to call it a very large government investment in private industries), you should take it up with your Congressmen. They're the ones responsible for your taxpayer money, and for the situation the economy is in in the first place.

If it is an investment, it is:

1) using my and your money, not the government's
2) a very bad investment, with no guaranteed returns or benefits

True, the gov. is mostly responsible for this. But there are also corrupt corporations lobbying for freebies. Next up will be bailouts for print newspapers and the steel industry.

[actiofidei]

Haha, half price or half of $2,000,000? Right now, about 0.003oz of gold will get you a pint. When hyperinflation kicks in (and obviously I believe it will), beer will still cost 0.003oz of gold but its price in dollars will skyrocket, not because beer is worth more, but because the dollar is worth that much less.

This has been on my mind lately.  I hear people say that an ounce of gold will buy as much bread today as it did in 1960 or whatever, but that the dollar price is much different.  They use this statement to advocate the gold standard.

But I wonder if it's really a commentary on the value of money or a misplaced analysis of commodities pricing.  How does the price of bread compare to pork bellies or to corn futures or to Texas sweet crude?

Inflation is a strange enemy.  At this point in my life, I own more debt than assets-- it's tempting to think that a bit of inflation would help me more than hurt.  I know it's shortsighted, but wouldn't it essentially make my obligations cheaper? 

But how does a single person hedge against runaway inflation?  There's no reason to keep money in the bank if you fear runaway inflation-- it's better to turn that cash into beans and cans of tunafish.  But who can stockpile enough Chicken of the Sea to really head off personal financial collapse?

actiofidei, no matter if you bring me $1,000,000 worthless dollars or a fleck of 0.0015oz gold, I've got a pint I'll sell you.

I actually like this post. The steady value of gold versus other commodities is a real phenomenon that, at least in the minds of gold standard advocates and the numbers, is a strong case for using gold as currency. For this same reason, gold is invaluable as an indicator of monetary inflation in a fiat money economy. To compare bread to sweet crude you would first of all have to have a commodity with a stable value through which to make the comparison, otherwise you are not seeing the actual value of each against some standard, but against a variable (our currency) that fluctuates in value. Plotting these graphs is actually a rather interesting exercise, I think. At least it's one of the ways I like to waste my time.

And yes, inflation helps those with debt in the short term. It also kills those with savings (like those who are smart with their cash, or people who are now retired and living off of their retirement funds...). And in the end it kills everyone, when it is done at the present rate. Even for the short-term effects it has on the retired elderly, the savers, and, well, everyone who is not in debt, inflation should be seen as an immoral means of taking money from one group of people and giving it to another through coercion. What's worse is that so few people realize it as such.

I don't keep money in the bank. At all. I keep enough to buy what I need as I need it. Otherwise it is invested in, well, big surprise... things like gold. I recommend the Perth Mint in Australia, to anyone who is crazy like me, reading this, and still has their money in $US.

[actiofidei]

If you have issue with the so-called "bailout" (I prefer to call it a very large government investment in private industries), you should take it up with your Congressmen. They're the ones responsible for your taxpayer money, and for the situation the economy is in in the first place.

If it is an investment, it is:

1) using my and your money, not the government's
2) a very bad investment, with no guaranteed returns or benefits

True, the gov. is mostly responsible for this. But there are also corrupt corporations lobbying for freebies. Next up will be bailouts for print newspapers and the steel industry.

The Federal Reserve has printed TRILLIONS since this crisis began without any congressional say, any legislation, not even an unconstitutional act of the executive. This is not conspiratorial. It is a fact. Several congressman have been pushing the Fed to disclose how the money was allocated, but the Fed has absolutely zero obligation to do so, and hasn't.

[WhollyRoaminCatholic]

I don't keep money in the bank. At all. I keep enough to buy what I need as I need it. Otherwise it is invested in, well, big surprise... things like gold. I recommend the Perth Mint in Australia, to anyone who is crazy like me, reading this, and still has their money in $US.

Keeping a significant percentage of your investments in something like gold seems irrational to me.  It's just too unpredictable. 

1-year:


20-year:


I know that some critics will bemoan these graphs, saying they reflect an unstable dollar more than an unstable gold price.  Meh.  It's no saner when measured in Euros either.

1-month EUR:
 

The problem is that you can't sensibly consider the value of gold in relation to a gold-backed dollar: a source cannot authenticate itself.

Frankly at this point, I don't trust gold as a reliable benchmark for anything.  Its value is more subject to international cartels, mining (and environmentalists), hoarding, hoarding, and the unpredictability of foreign stock markets than is the price of Saudi petroleum.

[actiofidei]

I don't keep money in the bank. At all. I keep enough to buy what I need as I need it. Otherwise it is invested in, well, big surprise... things like gold. I recommend the Perth Mint in Australia, to anyone who is crazy like me, reading this, and still has their money in $US.

Keeping a significant percentage of your investments in something like gold seems irrational to me.  It's just too unpredictable. 

1-year:


20-year:


I know that some critics will bemoan these graphs, saying they reflect an unstable dollar more than an unstable gold price.  Meh.  It's no saner when measured in Euros either.

1-month EUR:
 

The problem is that you can't sensibly consider the value of gold in relation to a gold-backed dollar: a source cannot authenticate itself.

Frankly at this point, I don't trust gold as a reliable benchmark for anything.  Its value is more subject to international cartels, mining (and environmentalists), hoarding, hoarding, and the unpredictability of foreign stock markets than is the price of Saudi petroleum.

There is really nothing unpredictable about the value of gold. The fluctuation in the value of gold against the dollar (and against the euro, which is itself another fiat currency) is only a reflection of inflation (I say "only" for this discussion's sake, anyway). The price of gold, although it may seem unstable on a small time scale, is very stable over longer periods of time.

The only way that the value of gold will see negative change against the dollar is in the scenario of long term deflation. But, the Fed is doing everything in its power to increase inflation. It makes no secret of this fact; inflation is the Fed's overt policy.

I have yet to see anything that suggest that the value of gold is itself unstable. It is not a place to put your money if you want to see major returns on an investment, but in terms of capital preservation it seems pretty safe. And, in a time of monetary inflation like the one we are seeing now, there will be some return on the investment, at least in terms of dollars. In terms of commodities, though, the value will remain stable.

[actiofidei]

Really, these graphs just go to show how unstable the dollar is, and how unwise it is to keep your money in it. The very argument you make against keeping gold can be made with these same facts against keeping dollars. The only difference is, there are other facts to support the investment in gold.

[Stephanos]

No, one should not invest entirely in gold. The common consensus among "free-market" analysts, like Peter Schiff (who predicted this mess) is to get out of American currency altogether and divide one's portfolio among stuff like:

1) Some gold (not much)
2) Foreign currencies (yen is popular for some reason)
3) Commodities (durable goods, maybe some foodstuffs, etc.)

And, of course, shorting the market is probably not a bad idea.

I'm by no means an expert - this is just general hearsay I've found out on the web and from some friends.

Someone I know is even considering buying one or more assault rifles and treating them as investments; if another ban occurs the guns could skyrocket in value.

[wolseley]

Sorry, Chrysler, but all of you folk are going to lose your jobs like everyone else in this mess. We've only made things worse for everyone in the long run by making things a little bit better for you in the short run. Now you, me, and everyone else is going to be even worse off in a year than you would've been next month had the Big Three failed.

I have no idea what will happen by the end of this year, but if everything happens to be better instead of worse, do I get to say "I told you so" anyway?

I predict that by January 3rd, 2010, the United States is going to look a lot like Weimar Germany: legions of unemployed, nonexistant industry, worthless currency.

I pray that I am wrong.  But I don't think so.

[actiofidei]

No, one should not invest entirely in gold. The common consensus among "free-market" analysts, like Peter Schiff (who predicted this mess) is to get out of American currency altogether and divide one's portfolio among stuff like:

1) Some gold (not much)
2) Foreign currencies (yen is popular for some reason)
3) Commodities (durable goods, maybe some foodstuffs, etc.)

And, of course, shorting the market is probably not a bad idea.

I'm by no means an expert - this is just general hearsay I've found out on the web and from some friends.

Someone I know is even considering buying one or more assault rifles and treating them as investments; if another ban occurs the guns could skyrocket in value.

Stephanos, that sums it up pretty well. I should not have said that I have all of my money in gold, or even most of it. In fact, Peter Schiff's company Euro Pacific Capital, is the one dealing with my money. I cannot echo strongly enough the advice to get out of the dollar.